2023.03.27 S&P 500 index remain volatile 3,600 to be the support

According to data from the U.S. Labor Department, applications for jobless claims in the U.S. for the week ending March 18 totaled 191,000, below the expectation of 198,000, with a decline of 1,000 from the previous period. The data pointed to a strong labor market despite the increase in interest rate. Sales of newly built homes in February increased 1.1% MoM to 640,000. The property market is starting to stabilize. For the inflation data, CPI increased 6% YoY/0.4% MoM, and the core CPI rose5.5% YoY/0.5% MoM, which showed that the inflation inflationary pressures had continued.

The Federal Open Market Committee (FOMC) announced to raise the federal funds rate by 25 basis points to 4.75% to 5%, the highest level since October 2007. Moreover, the Federal Reserve has also lowered the expectation of U.S. economic growth, including lowering the U.S. GDP growth forecast for 2023 to 0.4% (from 0.5%) and lowered the U.S. GDP growth forecast for 2024 to 1.2% (from 1.6%). After the collapse of Silicon Valley Bank, more banks in the U.S. are facing similar problems. Interest rate hikes had huge impact on the value of bank assets such as securities and had increased the vulnerability of the US banking system. Due to the uncertainties in the near term, we expect the S&P 500 index to remain volatile and to trade between 3,600 points and 4,200 points.

As market expects the Fed to stop increasing the interest rate from June 23, investors can pay attention to technology stocks with outstanding performance and growth potential.

Salesforce (CRM.US). In 2022, the company’s total revenue was US$26.49 bn, +25% YoY, with a non-GAAP operating margin of 18.7%. The company’s total revenue in 4Q22 was US$7.33 bn, +26% YoY.

The company is the second largest SaaS company in the world after Microsoft. In FY22, the company’s operating cash flow reached $6.0 bn, +25% YoY, reaching the a historic high. The company currently dominates the customer relationship management (CRM) market with a 24% market share and consecutive 20%-30% QoQ growth. The company raises 1Q23 revenue guidance to US$7.3-7.38 bn, +24% YoY. Mgmt expects the adjusted FY23 EPS to reach US$4.62-4.64 and revenue to be US$32.0-32.1 bn. With such wide applications for its products, which are suitable for many different companies, it is recommended to buy at US$184.0, target at US$206.0, and stop loss at US$173.0.

Nvidia (NVDA). The company’s revenue in 4Q22 was US$6.05 bn, -21% YoY but +2% QoQ; net profit was US$1.41 bn, -53% YoY but +108% QoQ; the company’s adjusted net profit in 4Q22 was US$2.17 bn, -35% YoY but +49% QoQ. The company’s 4Q and FY22 performance are better than market expectations.

Compared with competitors such as Intel and AMD, Nvidia currently has the fastest GPU Hopper H100 and Ampere A100 architectures. Mgmt said that the company will continue to invest in AI technology, launching new services and hardware designed to power a series of AI products. For the AI industry’s most important A100 chip and the next-generation product H100 chip, Nvidia’s orders to foundries are expected to increase. Nvidia also released its new AI Foundations service, which will allow corporate users to build and run their own large-scale language and generative AI models based on the data they provide. The company is expected to benefit from the application of AI, and it is recommended to buy at US$260.0, target at US$292.0, and stop loss at US$245.0.